News from Notch Consulting, Inc.

May 29, 2008

Cabot to Build Masterbatch Plant in Dubai

Filed under: Carbon Black, General — Notch @ 8:10 am

On May 28, 2008, Cabot announced plans to build a carbon black masterbatch facility in the Jebel Ali Free Zone, Dubai. The plant will have a capacity of 25,000 tonnes per year, expandable to 75,000 tonnes per year. Construction will begin later in 2008 and the plant is expected on-stream in the fall of 2009. The facility will allow the company to meet increasing demand from customers in the Middle East, Europe, and Asia/Pacific regions.

Cabot Vice President and General Manager for the Performance Segment, Sean Keohane said, “Within the Middle East there is already strong demand for PE and PP compounds for use in building infrastructure for water supply, electricity, and telecommunications projects. These are key markets for carbon black masterbatch. This new site will offer significant quality and service advantages to Middle East producers who are global exporters of masterbatch compounds.”

May 28, 2008

Sid Richardson Adds “True-Up” Cost to Quarterly Carbon Black Pricing Formula

Filed under: Carbon Black — Notch @ 3:20 pm

Sid Richardson Carbon today made a major announcement regarding the structure of its quarterly pricing formulation. Below is the announcement in its entirety.

Sid Richardson Carbon and Energy expresses need for change in price structure as feedstock costs continue to rise.
Oil prices continue to reach record highs almost daily, creating unsustainable cost pressures for carbon black production under the current quarterly pricing formula. Despite recent cost controlling investments, current market conditions require Sid Richardson to move its customers to a “true-up” formula that more fairly accounts for these cost increases. Under the true-up, actual feedstock costs are tracked during the quarter, and a debit or credit is issued at the quarter’s end to match that quarter’s formula prices to the true feedstock costs. The time is right for Sid Richardson to change its pricing formulas in order to make our operations economical in the wake of spiraling oil prices. Without this move, Sid Richardson may be forced to idle production units in order to avoid losing further money on each pound of production.

In related news, I recently heard from another domestic carbon black producer that suppliers were considering or in some cases already implementing “off-contract” price increases to compensate for higher feedstock costs.

Last month, in discussing Cabot’s most recent earnings report, I highlighted the fact that Cabot was altering its contracts to focus on margins rather than volumes. During the conference call, Cabot’s President and CEO, Patrick Prevost, responded to a question on contracts by saying, “Clearly, some of these contracts were negotiated at a time when oil prices and raw material prices were much more stable and they did not create the types of effects we’re seeing today. So we’re in the process of looking at how we’re going to deal with the situation, contracts will come up for renewal and we will consider ways to mitigate the lag and work with our customers to make sure both sides can actually live with a perhaps improved contract structure.”

Taken together, these developments suggest that the carbon black industry is now addressing the reality that traditional quarterly pricing formulas are not adequate to the current situation of steadily rising oil prices. The contract lag has become too large to be absorbed every quarter by the producer.

Note: Cabot is holding an Analysts Day tomorrow, May 29. I’m sure this topic will be discussed in greater detail.

SRF to Acquire Thai Baroda

Filed under: Tire Cord — Notch @ 1:02 pm

SRF Limited (Haryana, India) has signed a definitive agreement to acquire Thailand-based tire cord manufacturer Thai Baroda Industries Ltd. for about Rs. 100 crore ($23 million). The acquisition cost includes the purchase of fixed assets and other transaction costs. In addition, SRF will finance the working capital of the company as of the date of the completion of the transaction. The actual transfer of management control is expected to take a few months, contingent upon the approval of the rehabilitation process by the Thailand Court.

SRF will finance the working capital of the company. The actual transfer of management control is subject to approval of the rehabilitation process by the Thailand Court. In addition to tire cord, SRF produces industrial fabrics, specialty chemicals (refrigerant gases and other fluorochemicals), and polyester films. Thai Baroda has an annual production capacity of about 12,000 tonnes of dipped nylon tyre cord fabric with annual sales of around $50 million. The company has about 550 workers. Its manufacturing plant in Map ta Phut, Thailand, came on-stream in 1995. It produces high-tenacity nylon-6 yarn and cord fabrics, and is fully integrated from polymerization through dipping.

Ashish Bharat Ram, the Managing Director of SRF, is confident that SRF will be able to turn around TBIL in a short time-frame through financial restructuring after the takeover. He added that the acquisition was a significant step towards a global leadership position in the tire cord sector. With four existing production units in India and one wholly owned subsidiary unit in Dubai, the combined annual production capacity of SRF for tire cord following this acquisition would rise to 65,000 tonnes. This would enable SRF to emerge as the third largest tire cord fabric manufacturer in Asia and the fifth largest in the world, according to company figures.

Hindu Business Line on the acquisition.
Business Standard on the acquisition.

May 27, 2008

RJ Lee Group Receives Conditional Approval for Tire Recycling Plant in Pennsylvania

Filed under: Tire Recycling — Notch @ 2:29 pm

Last month, Notch wrote about plans by RJ Lee Group to build a tire recycling plant at the Paisley Industrial Park in Cumberland Township, in western Pennsylvania. In early April, the Greene County Planning Commission gave conditional approval to plans for the plant, and an application for environmental permits is being reviewed by the state Department of Environmental Protection. Pending state approval, the company hopes to begin operating the plant as early as the end of 2008.

As noted in our previous discussion of this plant, the plant will use a new depolymerization process supplied by Delta-Energy, a private company that was formerly was part of RJ Lee Group. The patented process reportedly results in higher quality carbon black than that produced from traditional high-heat pyrolysis. Delta-Energy currently operates a pilot plant in North Dakota that is producing recycled carbon black, as well as oil and syngas. According to sources at Delta-Energy, the new plant will have a capacity of about 35 tonnes of tire shred per day, resulting in about 14 tonnes of carbon black per day, or about 5,000 tonnes per year.

Delta-Energy has agreed to present a paper on its process at November’s Carbon Black World 2008 conference in Vancouver.

Here is an informative article on the logistics of tire recycling from the Pittsburgh Tribune-Review. It includes details on Delta-Energy’s process and pilot plant. According to Michael Blumenthal, vice president for environment and resource recovery for the Rubber Manufacturers Association, who is quoted extensively in the article,

While the technology [i.e., tire recycling processes that reduce scrap tires to oil, gas and carbon black] has been used by other companies, it has not proven to be a commercial success, Blumenthal said.

“There have been many, many attempts at this. At the present, there are no commercially viable operations that are recycling tires into carbon char, oil and gas,” Blumenthal said.

To make it economically feasible and achieve maximum operational efficiency, Blumenthal said a company would have to get 1.5 million to 3 million scrap tires, or the equivalent of those tires turned into shreds, in a year. A company could operate its own shredding plant or buy the shredded tires from a processor.

He accurately points out that the key to success for these operations is the development of a viable end-use markets for the plant’s output (i.e., oil, process gas and carbon black).

Here is RJ Lee Group’s announcement of the plant.

Carbon Black Conference Announces Workshop on Energy Recovery, Emissions Abatement

Filed under: Carbon Black — Notch @ 2:01 pm

Intertech-Pira has announced a day-long pre-conference workshop for Carbon Black World 2008 entitled, “Energy Recovery and Emissions Abatement in Carbon Black Manufacture.” The seminar will be held on November 3, 2008 from 8:00 am to 3:00 pm at the Renaissance Vancouver Hotel Harbourside in Vancouver, BC, Canada. The seminar will be conducted by C.P. Natarajan of Ganpads, a highly respected consultant to the industry who specializes in these areas. The seminar will address the range of state-of-the-art energy equipment currently available for plants, how to keep equipment functioning when problems arise, and how to identify operational problems before they occur.

Key topics to be covered:
-Basics of carbon black energy recovery
-Energy recovery equipment and comparison of available design
-Corrosion and material selection
-Operation, maintenance and safety
-Field problems and repair

For more information, check out the Carbon Black World 2008 website.

RPG Group to Invest $235 million in Carbon Black Expansions through 2010

Filed under: Carbon Black — Notch @ 11:06 am

According to its chairman, Rama Prasad Goenka, RPG Group (Kolkata) plans to invest Rs. 9,000 crore ($2.1 billion) in its power, tire and carbon black businesses over the next two years. Of this total, Rs. 6,000 crore ($1.4 billion) will be invested in the Calcutta Electric Supply Company, Rs. 2,000 crore ($470 million) will be invested in Ceat Tyres, and Rs. 1,000 crore ($235 million) will be invested in Phillips Carbon Black.

News article from DNA on the expansion announcement.

Phillip Carbon Black has three major expansions planned. In May 2008, Phillips Carbon Black signed an agreement with several Vietnamese companies to build Vietnam’s first carbon black plant. The plant is scheduled for startup in 2009. Phillips is also building a new plant at Mundhra, India, and expanding capacity at its plant in Cochin, India. Both of these projects are expected to be completed in 2009.

May 24, 2008

KKPC Responds to New Flexsys Suit

Filed under: Rubber Chemicals — Notch @ 7:22 am

On Thursday, May 22, Korea Kumho Petrochemical Co. issued a press release responding to the announcement by Flexsys America L.P. that it has filed a new U.S. International Trade Commission complaint regarding patent infringement claims against Korea Kumho and Sinorgchem, a Chinese company.

The main text of the release is below.

“Previous complaints made by Flexsys on the same patents have been resolved in KKPC’s favor,” remarked Sung Kyu Lim, KKPC’s Senior Vice President, “It is regrettable that Flexsys has chosen to improperly sue again on patent claims it has lost, even after stipulating it would not do so, and then to issue a press release in what appears to be a desperate and illegitimate attempt to poison the market for KKPC’s products. We are confident that we will once again defeat Flexsys’ patent claims, as we have done in the past.”

In its new ITC Complaint, Flexsys re-asserts infringement of its U.S. Patent No. 5,453,541 (“‘541 patent”) and U.S. Patent No. 5,608,111 (“‘111 patent”), pertaining to processes for producing 4-ADPA and 6-PPD. With Flexsys’ agreement, the U.S. District Court for the Northern District of Ohio ordered Flexsys on November 8, 2006 to never again file a patent infringement action against KKPC involving the processes currently being used to produce KKPC’s 6PPD products. Flexsys’ new ITC action is in violation of that Court Order. On July 13, 2006, the ITC entered a Final Determination in Flexsys’ previous ITC action against KKPC that KKPC did not infringe Flexsys’ ‘111 patent. Flexsys chose not to appeal the Final Determination in favor of KKPC. On December 21, 2007, the U.S. Court of Appeals for the Federal Circuit also found that KKPC’s 4-ADPA supplier, Sinorgchem Co, Shandong, did not literally infringe Flexsys’ ‘111 patent. Flexsys’ request for a rehearing of that adverse appellate decision was denied, without comment, on April 7, 2008.

May 22, 2008

Flexsys to Close UK Factory – Exiting DPG, TMQ, PVI Segments

Filed under: Rubber Chemicals — Notch @ 2:55 pm

On May 21, Solutia announced that its Flexsys subsidiary plans to cease manufacturing at its factory in Ruabon, Wales, by the end of 2008, with complete exit of the site exit by the end of 2011. With this closure, Flexsys will exit the market for three product lines currently manufactured at Ruabon: Santogard PVI pre- vulcanization inhibitors; Perkacit DPG, a secondary accelerator; and Flectol TMQ and Flectol HPG, which are antioxidants (Flectol HPG is a high performance grade of TMQ).

The Ruabon Works at Wrexham is the only Flexsys plant in the United Kingdom. Within Europe, Flexsys also has rubber chemical plants (including insoluble sulfur) in Belgium, France, Italy, Netherlands and Germany; other rubber chemicals plants are located in the US, Brazil, Japan and Malaysia.

From the Flexsys press release:

“This action is part of our strategy to strengthen the profitable, market-leading positions that Flexsys holds across most of its portfolio, while taking steps to limit our exposure in smaller product lines where Flexsys is no longer cost competitive,” said Jim Voss, president of Flexsys and senior vice president of Solutia Inc.

Voss added, “Our Ruabon site makes three product lines for which the market is over-supplied due to emerging competition from Far Eastern producers. Despite the significant steps our Ruabon management and employees have taken to improve the position of the site, it is unfortunately no longer cost competitive on a global scale. We will work to ensure the employees impacted by this change are treated the right way, and that our customers have a smooth transition to a new supply arrangement.”

According to the Flintshire Standard, a local paper, the closure will cost 162 jobs. The plant has been in operation for more than a century and is one of the oldest industrial sites in North Wales, according to another local paper, the Daily Post. It was first opened in 1867 to extract oils and wax from shale. Monsanto entered into partnership with the site in 1919 to produce vanillin, salicylic acid, aspirin and later rubber. Production of rubber chemicals began at the site in 1930, according to an informative 2003 profile of the Ruabon Works at Manufacturer.

Credit to European Rubber Journal (subscription required) for the news.

May 20, 2008

Notch Consulting Releases New Report: Tire Industry Investment 2008

Filed under: General, Tires — Notch @ 3:45 pm

In April, Notch Consulting Group published a new report on the tire industry entitled Tire Industry Investment 2008. It is an Excel-only report with three major components:

  • An overview of recent and proposed tire industry capital projects. Information provided for each project includes company, plant location, project details, tire types affected, budget, announce date, and scheduled completion date. The report provides data on 129 separate projects completed or announced since January 1, 2007.
  • A forecast for tire production and rubber consumption by country, including projections for both short-term growth (2008–2010) and long-term growth (through 2015 and 2025). Data provided include unit production of passenger and truck/bus tires and rubber consumption in tonnes for 26 leading countries, as well as regional and global totals.
  • Tire production capacity by plant for more than 500 tire plants worldwide. Data provided are company, plant location, plant capacity, tire types produced, and recent developments.

Here is an overview of the report’s contents.
Ordering and pricing information is here.

May 17, 2008

Flexsys Files New Complaint with US ITC Against Sinorgchem, Kumho

Filed under: Rubber Chemicals — Notch @ 2:29 pm

According to Rubber & Plastics News (subscription required), Flexsys America LP filed a new complaint with the US International Trade Commission on May 12, 2008 regarding its ongoing patent infringement suit against Sinorgchem Co. (Shanghai, China), Korea Kumho Petrochemical Co., Ltd. (Seoul, South Korea), Kumho Tire Co., Inc. (Seoul, South Korea), and Kumho Tire USA Inc. (Rancho Cucamonga, CA).

Flexsys alleges that Sinorgchem is infringing on its patented manufacturing process for 4-ADPA, a precursor for the production of 6PPD rubber antidegradants, and that Kumho is infringing by using SInorgchem’s 4-ADPA to produce 6PPD. The new suit requests that the Commission conduct an investigation under section 337 of the Tariff Act of 1930 and seeks a permanent injunction against the sale of 6PPD and 4-ADPA produced by Sinorgchem or Kumho in the US, as well as the sale of any tires made with these chemicals.

Here is a copy of the complaint.

Here is a copy of the press release.

Flexsys also continues to pursue its patent infringement suit against Sinorgchem, Kumho and others, which was originally filed in February 2005. The case was dealt a set-back in December 2007, when the US Federal Appeals Court vacated and remanded a February 2006 decision by the US International Trade Commission that found that Sinorgchem had literally infringed on the Flexsys patents. On April 7, 2008, the Federal Circuit denied Flexsys’ request for a rehearing of the decision by the full panel of judges on the Federal Circuit. These decisions bounced the case back to the US ITC to determine whether Sinorgchem’s processes infringe on Flexsys’ patents on other grounds.

Flexsys also has a civil patent infringement suit against Sinorgchem, KKPC and Kumho TIre pending before the Cleveland federal district court, but this case cannot be decided until the ITC process has been decided.

This blog has previously covered this topic here, here, here, and here.

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